FOREIGN DIRECT INVESTMENT (FDI)

WHAT IS FDI ? Foreign direct investment (FDI) is direct investment into production in a country by a company in another country, either by buying a company in the target country or by expanding operations of an existing business in that country. Foreign direct investment is done for many reasons including to take advantage of cheaper wages,and/or for special investment privileges such as tax exemptions offered by the country as an incentive to gain tariff-free access to the markets of the country or the region. Foreign direct investment is in contrast to portfolio investment which is a passive investment in the securities of another country such as stocks and bonds. FDI IN TELECOM: Indian telecom industry is growing at a great pace & India is expected to become a manufacturing hub for telecom equipment. Indian telecom equipment manufacturing sector is set to become one of the largest sectors globally by 2012. Due to rising demand for a wide range of telecom equipment, particularly in the area of mobile telecommunications, has provided excellent opportunities to domestic and foreign investors in the manufacturing sector. FDI is considered to be the life blood and an important vehicle for economic development as far as the developing nations are concerned. The important effect of FDI is its contribution to the growth of the economy. FDI has an important impact on countrys trade balance, increasing labor standards and skills, transfer of technology and innovative ideas, skills and the general business climate. FDI also provides opportunity for technological transfer and up gradation, access to global managerial skills and practices, optimal utilization of human capabilities and natural resources, making industry internationally competitive, opening up export markets, access to international quality goods and services and augmenting employment opportunities. OPPORTUNITIES FOR FDI IN INDIAN MARKET: There is an immense opportunity for DTH in the Indian market which is almost 10 times compared to the developed countries like the US and Europe. For every channel there is a scope for broadcasting it in at least ten different languages. So every channel multiplied by ten that is the kind of scope for DTH in the country. Indias media players have all the ingredients to develop a successful DTH industry. So currently there is a lot of pent-up demand in the Indian market for DTH. It is expected that by the year 2010 there will be over 500 million subscribers in the Indian telecom market. Cellular subscriber base is projected to grow at a CAGR (Compounded Annual Growth Rate) of 48 per cent & expected to reach 88 million in 2012. Over 150% growth in telecom services is projected in 5 years. India will require large investments in network infrastructure & India expected to be fasted growing telecom market in the world. Since the project expected to reach 30-40% per year 250 subscribers by 2009- 2010.Total estimate of investment opportunity of USS 22 billion

expected over the next five years. Investment opportunity of $22 billion across many areas: Telecom Devices and Software for Internet Broadband and Direct To Home Services Gateway exchange Set top box Modem Mobile handsets and consumer premise equipments Gaming devices EPABX Telecom Software Telecom Services for voice and data via a range of technologies. With the rapid growth of the telecom network, there are further opportunities to expand the telecom infrastructure and research and development. STATISTICS OF FDI FROM 2007-2012 Foreign Direct Investment (FDI) is one of the important sources to meet the requirement of huge funds for rapid network expansion. The FDI policy provides an investor-friendly environment for the growth of the telecom sector. Telecom has emerged as the third major sector attracting FDI inflows after services and computer software sector. At present, 74% to 100% FDI is permitted for various telecom services. This investment has helped telecom sector to grow. The growth of FDI in Telecom Sector since 2007 is as under: Foreign Direct Investment(in million US$)

YEAR 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

FDI (IN MILLION US$) 478 1261 2558 2554 1665 1931